From the U.S. Government Accountability Office, www.gao.gov
Transcript for: Watchdog Report: Disclosure of Airline Service Fees
Audio interview by GAO staff with Gerald Dillingham, Director,
Physical Infrastructure
Associated Report Number: GAO-10-785
Released on: July 14, 2010
[ Background Music ]
[ Narrator: ] Welcome to GAO's Watch Dog Report, your source for news
and information from the Government Accountability Office. It's July
14, 2010. As commercial airlines face greater financial difficulties,
they are increasingly charging fees for passenger conveniences such
as checked baggage and early boarding. These fees, along with the
federal taxes on passenger tickets, can add up. A group led by Gerald
Dillingham, a director in GAO's Physical Infrastructure team,
recently examined how these fees and taxes affect consumers and the
airline industry. GAO's Scott Golden sat down with Gerald to learn
more.
[ Scott Golden: ] Can you discuss some of the recent service fee
developments that have come to affect the airline industry and some
of the associated disclosure issues?
[ Gerald Dillingham: ] As you may know, over the last 2 years,
there's been an increase in the number of and types of fees that are
associated with airline travel. Some of these fees are new and some
of these fees have been previously a part of an airline ticket but
now they are separated out. It's called unbundling. And the fees
range from the one that most people are most familiar with are the
baggage fees, the cost for checking a bag or multiple bags. But there
are also fees for pillows and blankets, for food, for boarding early.
With regard to disclosure, part of the concern that's been expressed
both by the flying public as well as the Congress is that there is
not full disclosure and that it is very difficult for passengers to
be able to go to a Web site and determine what those fees are.
[ Scott Golden: ] What is the Airport and Airway Trust Fund and how
is it impacted by these fees?
[ Gerald Dillingham: ] The Airport and Airway Trust Fund is a
principal funding source for the Federal Aviation Administration.
They receive about 80 percent of their budget from this trust fund.
At present, those fees that are being charged that are you know in
the billions of dollars are not, in fact, taxed at the 7.5 percent,
which fares are generally taxed with regard to going into the trust
fund.
[ Scott Golden: ] You and your team examined how these service fees
affect baggage checking and handling. What did you find has changed,
if anything?
[ Gerald Dillingham: ] The consensus is that there are fewer bags
being checked. At the same time we found that there were more bags
being brought on board, in terms of, for the overhead compartments.
And that overhead compartment situation is a concern for the crews as
well in terms of overstuffing and potential safety concerns, as well
as for the passengers. In terms of baggage handling, we saw that
there were fewer mishandled bags, meaning that in terms of delays or
lost or that kind of thing.
[ Scott Golden: ] GAO also investigated the refund process for
certain taxes on passengers’ fares. What did you conclude about this
process?
[ Gerald Dillingham: ] In terms of the fees, there are several fees
that are attached to tickets, one of them being the security fee,
better known as the TSA fee. That is fully refundable if you do not
use a nonrefundable ticket. The problem with that or the concern with
that is that most passengers are not made aware of that and in fact
do not apply for the return of those fees. Some of the other fees
that are associated with airfares, such as the agriculture fee or the
customs and immigration fee, it is not yet determined whether those
fees are refundable or not. And again, many passengers are not aware
that it's possible or exactly how to go about getting a refund for
those fees.
[ Scott Golden: ] So what does GAO recommend to help improve fee
regulation and increase transparency for consumers in the airline
industry?
[ Gerald Dillingham: ] We've made several recommendations, mostly to
the Secretary of Transportation. And generally the recommendations
are that the Secretary of Transportation take whatever measures are
necessary using existing guidance to provide full disclosure of the
fees that might be associated with buying an airline ticket and ways
in which the fees may be, in fact, refunded and make that available
through all kinds of avenues of purchasing tickets. We've also
recommended that the Department of Transportation work with the
Department of Agriculture and the Department of Homeland Security in
terms of customs and immigrations to make some determination as to
the refundability of those fees as well.
[ Background Music ]
[ Narrator: ] To learn more, visit GAO's Web site at gao.gov, and be
sure to tune in to the next edition of GAO's Watchdog Report for more
from the congressional watchdog, the Government Accountability
Office.